Penderbrook Apartments in the Washington, DC suburb of Fair Oaks, VA, part of a master-planned community.

Penderbrook Apartments is part of a 259-acre master-planned golf course community in Fair Oaks, 20 miles west of Washington, D.C., in the heart of a steadily growing, economically stable suburban region. The 1.9-million-square-foot Fair Oaks regional shopping mall is nearby, on a major thoroughfare that links the community to downtown Arlington, Alexandria and Washington.

Several investor entities are competing aggressively to purchase Penderbrook. Most potential purchasers intend to continue to operate the property for current return as an income producing rental apartment complex, while others intend to convert the residences from rentals to condominium units.

Analysis in Progress

"Our consideration of the sale of Penderbrook is an example of the hold-versus-sale analysis we regularly perform on behalf of Wien & Malkin investors," observes Anthony Malkin, president of W&M Properties, the acquisition, management and marketing arm of the Malkin family. "When we bought the property, our analysis showed that its location and amenities could be combined with capital improvements and management skills to achieve a good current return with the potential for capital appreciation. Now, we are at a point at which the property is in first-rate condition, and the capital markets may pay more today than we think we can achieve for investors over time. If we can negotiate the right deal, we will take profits and consider new opportunities."

Constructed in 1989, Penderbrook Apartments consists of 17 three-story buildings, one two-story structure and a single-story clubhouse, with pool and tennis facilities, all occupying nearly 20 acres. After suffering - along with all other rental apartment properties - from increased vacancies caused by job losses and new home purchases over the last 24 months, the complex's occupancy has grown to 95%, benefiting from new job growth and the high price and scarcity of land, which are barriers to new home construction in its market.

If good opportunities are identified, the proceeds of the sale will be reinvested in accordance with the "like-kind exchange" rules of the IRS Tax Code, which allows sellers to defer taxes on capital gains. (Please see related story: Sale May Spur Formation of Co-Capital II)